U.S. Trade Confidence At Highest Level Since Second Half Of 2009 Says HSBC Survey

4 May 2011

Greatest Opportunities for Growth Seen in Greater China and Latin America

Foreign Exchange Fluctuations and Cost of Essential Services seen as Major Barriers

Access to Trade Finance Expected to Continue Increasing

Exporters and importers around the world remain optimistic about trade prospects in the next six months with the U.S. registering the highest level of trade confidence (111 points) since the country was first surveyed in 2009 by the HSBC Trade Confidence Index. With the desire to tap growth opportunities abroad and the growth prospects that the emerging markets represent, U.S. small to mid-size businesses are increasingly optimistic about global trade growth. The latest HSBC Trade Confidence Index released today found that 62 percent of U.S. respondents anticipate higher trade volumes in the next six months - an increase from the 56 percent of U.S. businesses that were optimistic about trade growth in the second half of 2010.

The HSBC Trade Confidence Index, the broadest international survey of small to mid-sized businesses engaged in cross-border trade, found that U.S. businesses are growing more optimistic about the global economy, with 59 percent of businesses expecting growth (up 13 percent from 2H10). Furthermore, the percentage associated with businesses that feel the global economy will decline over the next six months has fallen from 26 percent in the second half of 2010 to 19 percent.

"We are seeing more positive sentiment among U.S. businesses about the prospects global trade offers their businesses," said William Nowicki, Executive Vice President and Head of Trade and Supply Chain North America at HSBC. "U.S. businesses increasingly recognize the opportunities that are driven by intra-regional and emerging market trading as trade continues to be viewed as a catalyst for future global economic advancement."

The HSBC Trade Confidence Index covers a total of 21 markets - including key economies in the Asia-Pacific region, Middle East and North Africa (MENA), Latin America, North America and Europe. It is the largest trade confidence survey globally. The current survey comprises six month views of 6,390 exporters, importers and traders from small and mid-market enterprises on: trade volume; buyer and supplier risks; the need for trade finance; access to trade finance; and the impact of foreign exchange on their businesses.

Positive sentiment about trade activity and growth remains highest among the emerging markets with India (140), Saudi Arabia (132), Mexico (125) closely followed by Indonesia (123), Turkey (122), UAE and Singapore (both at 121). In the developed world, sentiment was positive in most cases with the U.S., Canada, Germany and Australia registering the highest levels of confidence.

Among the key findings of the HSBC Trade Confidence Index: foreign exchange fluctuations and cost of essential services are seen as major barriers to growth while government trade regulation as a trade barrier fell 10 percent over the last year. In addition, suppliers are becoming increasingly selective about the "buyers" they do business with as a way to mitigate risk of non-payment. Doing less business with particularly buyers jumped 17 percent from September 2010 while strategies around payment terms such as advanced payments, tightened terms and duration fell a combined 15 percent.

Other noteworthy U.S. findings of the HSBC Trade Confidence Index include:

U.S. companies continue to have a strong interest in trade with Greater China, which respondents selected as the most promising region for trade growth in the next six months.

A trend that is likely to continue is a decline of U.S. trade with Canada as more businesses focus on trade growth with Latin America. The region came in second as the most promising region for trade growth in the next six months followed by Canada.

U.S. small to mid-size businesses continue to conduct the most trade with Canada followed by Latin America and Greater China. However, Southeast Asia has experienced a steady decline in trade with the U.S., falling a total of 29 percent over the course of the past two years.

The majority of nations surveyed in the HSBC Index experienced an increase in trade activity, as well as an increased rating for their level of promise for trade growth in the next six months in comparison to 2H10.

"Trade with emerging markets has not only provided individual countries with a greater source of capital and a growing entrepreneurial prowess, but along with intra-regional trade, it has advanced the overall state of global trade," Nowicki stated. "Companies with roots extending around the world have hands-on experience and insight to help businesses better understand the trade growth opportunities on a global scale. When it comes to navigating the field, U.S. businesses must look for partners who have the experience to help them in all regions in which they conduct or plan to conduct trade."

The HSBC Trade Confidence Index also revealed:

Almost 75 percent of the businesses surveyed expect the need for trade finance to maintain the same level with approximately 25 percent agreeing that their need will increase.

While those surveyed expect the Renminbi ("RMB") to become one of their top three trade settlement currencies in 2011, the U.S. dollar continues to be the dominant currency of choice for trade settlement, and respondents expect that trend will continue over the next six months.

The top three barriers for U.S. companies growing their import/export business include:

Costs of essential services, such as shipping, logistics and storage

Fluctuating exchange rates

Insufficient margins or profitability

Notes to editors: methodology and more details of the survey

About the survey

The results were used to calculate an index range from 0 to 200, with 200 representing the highest confidence level, 0 representing the lowest and 100 being neutral. The HSBC Trade Confidence Index covers a total of 21 markets - including key economies in the Asia-Pacific region, MENA, Latin America, North America and Europe. It is the largest trade confidence survey globally. The current survey comprises six-month views of 6,390 exporters, importers and traders from small and mid-market enterprises on: trade volume; buyer and supplier risks; the need for trade finance; access to trade finance; and the impact of foreign exchange on their businesses. Please see the attached report HSBC Trade Confidence Index - May 2011 for more information. The survey was conducted by research company TNS between February to March 2011.

HSBC Trade and Supply Chain

HSBC Trade and Supply Chain is one of the largest trade services organisations in the world. Our awardwinning international trade expertise combines over 140 years of extensive experience in international trade with a unique blend of local knowledge, supported by advanced technology and our extensive network of dedicated trade services offices in over 60 countries and territories worldwide.

HSBC Bank USA, National Association, with total assets of $181 billion as of 31 December 2010 (US GAAP), serves around 4 million customers through its personal financial services, commercial banking, private banking, asset management, and global banking and markets segments. It operates more than 470 bank branches throughout the United States. There are over 370 in New York state as well as branches in Connecticut, Washington, D.C., Florida, New Jersey, Pennsylvania, Maryland, Virginia, California, Delaware, Illinois, Oregon and Washington State. HSBC Bank USA, N.A. is the principal subsidiary of HSBC USA Inc., an indirect, wholly-owned subsidiary of HSBC North America Holdings Inc., one of the nation's largest bank holding companies by assets. HSBC Bank USA, N.A. is a member of the FDIC.

HSBC Holdings plc, the parent company of the HSBC Group, is headquartered in London. The Group serves customers worldwide from around 7,500 offices in 87 countries and territories in Europe, the Asia-Pacific region, the Americas, the Middle East and Africa. With assets of $2,455 billion at 31 December 2010, HSBC is one of the world's largest banking and financial services organizations. HSBC is marketed worldwide as "the world's local bank."